A former editor for Forbes and the Financial Times, Eamonn Fingleton spent 27 years monitoring East Asian economics from a base in Tokyo. In September 1987 he issued the first of several predictions of the Tokyo banking crash and went on in "Blindside," a controversial 1995 analysis that was praised by John Kenneth Galbraith and Bill Clinton, to show that a heedless America was fast losing its formerly vaunted leadership in advanced manufacturing -- and particularly in so-called producers' goods -- to Japan.
His 1999 book "In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity" anticipated the American Internet stock crash of 2000 and offered an early warning about the abuse of new financial instruments.
In his 2008 book "In the Jaws of the Dragon: America’s Fate in the Coming Era of Chinese Hegemony," he challenged the conventional view that China is converging to Western economic and political values.
His books have been translated into French, Russian, Korean, Japanese, and Chinese. They have been read into the U.S. Senate record and named among the ten best business books of the year by Business Week and Amazon.com.

The Boeing 787: The Truth Finally Hits the Fan

Take-off for a 787 -- and for the Japanese aerospace industry. (Photo credit: Wikipedia)

Congratulations to James B. Stewart on a superb New York Timesarticle yesterday on BoeingBoeing. As he has pointed out, fully 35 percent of the airframe of the 787, the troubled, if superbly advanced, new Boeing jetliner, is being made in Japan. This reflects a highly organized, subsidy-drenched effort by the Japanese industrial system to succeed the United States as the world leader in aerospace. All in all, 70 percent of the 787 is being manufactured outside the United States, up from less than 2 percent for the 747 in the late 1960s. A reasonable guess — if one that Stewart stops short of suggesting — is that Boeing is going the way of Zenith, XeroxXerox, General Motors, and other erstwhile American industrial titans that have had their clocks cleaned in East Asia.

For 99 percent of the New York Times’s readers Stewart’s report was new news but actually most of his information has been in the public domain for nearly a decade. If you doubt this, click here for “Boeing, Boeing,….Gone,” an article I wrote in 2005. My article actually went further than Stewart’s in that it pointed out that, as part of the deal, Boeing transferred its priceless wing and wingbox secrets — its crown jewels — to Japan. The deal was concluded by an already compromised and subsequently disgraced Boeing CEO Harry Stonecipher. It was approved by the George W. Bush administration.

All this does not diminish Stewart’s achievement: New York-based and a long way from the action, he has done a Pulitzer-level job in disinterring troubling facts that officials and executives on both sides of the Pacific have worked hard to bury. He has also confounded a pattern of self-censorship among Tokyo-based foreign correspondents. Although informed Tokyo-based economic observers have understood all along that Boeing’s deal with Japan was a Faustian bargain, they have also understood that it was unhelpful for their careers to say so (Tokyo has never been a free-speech zone, least of all in recent times when it has become so easy for Japan’s authoritarian bureaucrats to marginalize “troublemakers”). Tokyo-based foreign correspondents have instead promoted approved themes, notably the myth that Japan has become the basket case of the industrial world. This theme, which I debunked in an article in the New York Times Sunday Review last year, helps the Tokyo authorities fend off American pressure for the opening of Japan’s still closed markets and keeps hot money out of the yen.

Back to Boeing. It subsumes almost all the then independent companies that put Neil Armstrong on the moon in 1969. It is the last remnant of an American manufacturing base that once powered the most successful exporting nation in history. How come Boeing’s hollowing out has taken so long to reach the New York Times? Welcome to the information age. It is an age in which information moves at the speed of light — except when it doesn’t.

Eamonn Fingleton is the author of In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity (Boston: Houghton Mifflin, 1999).

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It was clearly a grave mistake for Boeing to release key components of its proprietary technology to industry in Japan, a prominent competitor in global trade. Beyond that I can’t help wondering if the WTO case of competing subsidizes between Airbus and Boeing took into consideration the heavy subsidy support from Japan and other nations, or was only based on U. S. versus European subsidies.

Boeing will never see the return of knowledge it shared. Once information has been shared it can only lead to more spread of the information, not less. It will also never see the same share of profits it earned on other airplane designs because shared risk also means shared profits.

Emnon, this is a ridiculous article….to say Japan which still and has been dominating the automobile industry and consumer appliances and electronic goods for decades is not an industrial powerhouse is a total joke…sir, just look at their per capita income…that all the proof is needed….they r producing high value items sir in droves!!

This may be a surprise to most people but it certainly isn’t a surprise to anyone who’s paid any attention to the Boeing and EADS/Airbus completion going on now for more than a decade. This fierce competition has created an opportunity that “countries” which decide who their airlines will buy planes from, have used to their great advantage, insisting on some quid pro quo in the form of production being done in their countries. You might take a look at China and India, as well. And, the airlines also benefit from the completion; they love the situation.

Not mentioning Airbus in this article, is absurd. The IAM (union) was very unhappy with Boeing “outsourcing” so much of “their” work but even they were convinced by the evidence of the ever growing Airbus sales, that the choice was to see Airbus drive Boing out of business or have Boeing also outsource some of the work and take a smaller share of the work.

By the way, the ideal of the WTO has been shown to be nowhere near it’s intended purpose. The EADS/Airbus Boeing (EU/US) legal battles over subsidies, which drug on for over a decade, resulted in a WTO decision which both sides are now further litigating. As has been pointed out, the WTO has no enforcement mechanism, so after it comes up with a ruling, the litigating parties each decide what the ruling means. Surprise-surprise, they don’t agree on that either! :)

I was responding to a question as to whether or not the subsidy rules/WTO applied to U.S and Japan.

GATT 92 was pretty specific to Airbus/Eads at that time, since Japan was not really in the LCA large commercial Aircraft game.

Mixed in with the subsidy game was how new airplanes could be financed via low cost government loans. Which wound up as a shell game. IF Airbus did not meet goals of xxx planes sold in YY years, then the low cost ” loan” would be forgiven.

U S OTOH could file what is known as a CounterVailing Duties petition to ‘level the playing field”

Mixed in with the mess in the late 90′s was the U.S Byrd amendment regarding who would get the monies if the petition was successful.

Thanks for responding, Joe; you appear to be much more knowledgeable about the details than I am (ground level view vs. my 60 thousand foot view, speaking of aircraft :) ). I certainly agree that it’s complicated, I’d say it’s a complicated mess! :) We have many large corporations doing business around the globe in countries with different laws and views on what the rules are or should be.

It was Rockwell International that did all the major work on man on the moon. Boeing bought them out in 1998 and began to take credit for work they never did. This new crew at Boeing thought they knew it all. Out sourcing and accepting based on certifications and not testing at buy off to save dollars and now it is biting them in the buttkus. The present CEO is not a hands on guy, just a publist who is not too great at that.